View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by KDI School Archives A STUDY ON FOREIGN DIRECT INVESTMENT IN CAMEROON By Kum, Emmanuel Bang THESIS Submitted to KDI School of Public Policy and Management in partial fulfillment of the requirements for the degree of MASTER OF BUSINESS ADMINISTRATION 2009 A STUDY ON FOREIGN DIRECT INVESTMENT IN CAMEROON By Kum, Emmanuel Bang THESIS Submitted to KDI School of Public Policy and Management in partial fulfillment of the requirements for the degree of MASTER OF BUSINESS ADMINISTRATION 2009 Professor MICHELL, Anthony i A STUDY ON FOREIGN DIRECT INVESTMENT IN CAMEROON By Kum, Emmanuel Bang THESIS Submitted to KDI School of Public Policy and Management in partial fulfillment of the requirements for the degree of MASTER OF BUSINESS ADMINISTRATION Committee in charge: Professor Anthony MICHELL, Supervisor ______________________ Professor Seung Joo LEE ______________________ Professor Seong-Ho CHO ______________________ Approval as of August , 2009 ii ABSTRACT This Study investigated: A Study on Foreign Direct Investment in Cameroon (FDI). FDI has attracted a lot of attention from developing countries because of its perceived advantages in terms of capital injection, technological transfer and economic growth. Three hypothesis were formulated to examine contributions made by FDI to an ailing economy like that of Cameroon between 1986 and 2003 FDI contributions were studied first from the macroeconomic and microeconomic levels. At the macroeconomic level, a large flow of FDI did not have a large positive impact on the economy. At the microeconomic level its contributions to some industries was very significant. A sample of 398 economic operators responded to the questionnaire. The chi-square test of independence was used to test the hypotheses at 0.05 alpha level of significance. At this level, all the null hypothesis were rejected and the alternatives retained leading to the results that;- - FDI contributes significantly in alleviating poverty. - FDI contributes significantly in technological advancement - FDI significantly attracts the interest of donor countries Thus it was concluded that FDI did play a major role in the economy recovery of Cameroon during the period of the economic crises. iii Dedicated to my Children Jane-Samira Embi Bang and Fangmbeng Mathews Cunning iv ACKNOWLEDGMENTS This work has been made possible thanks to the valuable contribution of many people. Thanks to God almighty for the love, care and spiritual guidance he gave me through out this research. Profound thanks goes to my supervisor Professor Anthony Michell who was always there to correct my work and make necessary suggestion. Special thanks to the entire staff of KDI School of Public Policy and Management Korea, for their spiritual and academic encouragement. My sincere gratitude to my elder brothers Kum Julius Geh and Kum Boniface Geh who supported me morally and financially. Lots of thanks to my lovely wife Fangmbeng Bisi Esther who was always there to comfort and encourage me. My appreciation to Mrs. Neba Sirri Veronica and her husband Pa Neba Labo (of blessed memory) for their moral and financial support throughout this research. I would like to convey my appreciation to my Dad Kum Joseph Bang and wife Christina Ndum for their physical and moral support. My gratitude also goes to all 2007 students for their educational encouragement. v TABLE OF CONTENTS Cover page……………………………………………………………………….…..i Abstract………………………………………………………………………….…...ii Approval page……………………………………………………………………….iii Title page…………………………………………………………………………….iv Dedication………………………………………………………………………...….v Acknowledgement…………………………………………………………………..vi Table of content……………………………………………………………………..vii List of table………………………………………………………………………….xi List of figures…………………………………………………………………….…xii CHAPTER ONE: INTRODUCTION…………………………………………….1 1.1 Background of the study:………………………………………………………..1 1.1.1 Historical Background………………………………………………………4 1.1.2 Theoretical Background ................................................................................5 1.1.3 Conceptual Background .................................................................................6 1.2 Statement of the problem ....................................................................................7 1.3 Research Questions .............................................................................................7 1.3.1 General Research Questions ..........................................................................7 1.3.2 Specific Research Questions ..........................................................................7 1.4 Aim of the study..................................................................................................7 1.4.1 Objectives of the study ...................................................................................7 1.5 Hypotheses of the study ......................................................................................8 1.5.1 General Hypotheses .......................................................................................8 1.5.2 Specific Hypotheses .......................................................................................8 1.6 Significance of the study .....................................................................................9 CHAPTER TWO: RELATED LITERATURE ON FDI .....................................10 2.1 Concept of FDI ....................................................................................................10 2.2 FDI Theories ........................................................................................................12 2.2.1 International Trade Theory ...............................................................................12 2.2.2 Direct Investment theories ................................................................................13 2.2.3 Oligopoly Model ...............................................................................................13 2.2.4 Theory of Country size .....................................................................................14 2.2.5 Product life cycle Theory ..................................................................................14 vi 2.3 Corporate motives for FDI ...................................................................................15 2.3.1 Sale Expansion ..................................................................................................15 2.3.2 Resources Acquisition ......................................................................................15 2.3.3 Minimization of Competitive Risk ...................................................................16 2.4 Approaches to FDI ...............................................................................................16 2.4.1 Direct Investment ..............................................................................................16 2.4.2 Joint Venture .....................................................................................................17 2.4.3 Mixed Venture ..................................................................................................17 2.5 National Control of FDI .......................................................................................17 2.5.1 Control Investor of Home –Based countries .....................................................18 2.5.2 Control by the Host Country .............................................................................21 2.6 International control of FDI .................................................................................24 2.6.1 The Association of South East Asian Nations (ASEAN) 25 Investment Agreement ...............................................................................................26 2.6.2 North American Free Trade Agreement (NAFTA) ..........................................26 2.6.3 Infrastructure Treaties .......................................................................................28 2.7 Relationship between FDI and Economic Development .....................................29 2.7.1 Technological Spillovers ..................................................................................29 2.7.2 NMC Linkages ..................................................................................................29 2.7.3 Economic Growth…………………………………………………………….30 CHAPTER THREE: CAMEROON’S ECONOMIC STRUCTURE………….31 3.1 Country Location .................................................................................................31 3.2 Country Profiles ...................................................................................................31 3.3 Strengths and weaknesses of the Economy .........................................................33 3.4 The investment Environment ...............................................................................35 3.5 Openness to FDI ..................................................................................................38 3.5.2 Conversion and Transfer policies ....................................................................40 3.5.3 Expropriation and Compensation .....................................................................41 3.5.4 Dispute Settlement ............................................................................................41 3.5.5 Investment Requirements and Incentives .........................................................42 3.5.6 Taxation ............................................................................................................44